NEWS RELEASE
No.2009-C-542

Jun 22, 2009

R&I Downgrades to AA-, Stable: Nippon Accommodations FundRating and Investment Information, Inc. (R&I) has announced the following.
ISSUER:

Nippon Accommodations Fund Inc. (Sec. Code: 3226)
Issuer Rating

R&I RATING:

AA- (Downgraded from (AA); Removed from the Rating Monitor)
RATING OUTLOOK:Stable

RATIONALE:
Nippon Accommodations Fund Inc. (NAF) is a real estate investment trust (J-REIT) that went
public in August 2006. The fund invests in "accommodation assets" primarily for rental purposes,including dormitories, student apartments, serviced apartments, senior residences and corporate
housing. Mitsui Fudosan Co., Ltd. serves as its sponsor.
R&I has downgraded the ratings this time chiefly because 1) LTV ratios (Debt / Total assets) havebeen high during the past year, standing in the mid-50% range, 2) It will remain difficult for NAF to
substantially reduce LTV ratios through a capital increase due to a continued slowdown in the REIT
market, and 3) The harsh environment for a capital increase has been impeding NAF's external growth.
R&I assigned a rating of AA based on its expectations that LTV ratios will generally stay between
40% and 50% and even if the ratios temporarily exceed 50% due to a series of property acquisitions,they will be reduced through a capital increase, etc. and will not remain high for a long period of time.
Despite market fluctuations that will affect its capital increase, R&I expected that NAF will build trackrecords by leveraging the strong creditworthiness of its sponsor, as well as its competitive advantages in
the residential REIT sector, and steadily expand its assets while controlling LTV ratios. However, due
to the drastic change in the REIT market, it has become difficult for NAF, like its competitors, toincrease its capital. Several factors, including LTV ratios, actual control of LTV ratios, and asset size,
have changed from those R&I originally expected when assigning a rating.
Meanwhile, regardless of its LTV ratios, NAF has been refinancing its debts successfully.
Supported by its sponsor's creditworthiness, NAF maintains good relationships with major financial
institutions in Japan. While spreads are increasing like other REITs, NAF steadily continues to raise
unsecured funds, mainly at long-term fixed interest rates.
Occupancy rates of NAF's properties are solid. 92% of NAF's properties are located in the 23 wardsof Tokyo. NAF's properties are mostly large with the average acquisition price of 3.2 billion yen, andthey are new, standing only for approximately 7 years on average (approximately 3 years, excluding
Okawabata Apartment Communities). Furthermore, rentable units exceed 4200 and are well diversified.
Strong property competitiveness, diversified tenants and the Mitsui Fudosan group's leasing capability
are major components that support NAF's high occupancy rates.
NAF is taking a cautious stance on a further increase in the leverage. Given that the cash flow andfundraising conditions remain solid as noted above, the Rating Outlook is Stable.

The primary rating methodologies applied to this rating are provided at "R&I J-REIT Rating
Methodology" and "Basic Methodologies for R&I's Credit Rating". The methodologies are available
at the web site listed below, together with other rating methodologies that are taken into
consideration when assigning the rating.
http://www.r-i.co.jp/eng/rating/st/methodology.html
http://www.r-i.co.jp/eng/rating/rating/methodology.html

Rating and Investment Information, Inc. Nihonbashi 1-chome Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027, Japan
Investors Service Division TEL.03-3276-3511 FAX.03-3276-3413 http://www.r-i.co.jp
Credit ratings are statements of R&I’s opinions regarding an issuer’s general capacity to repay its financial obligations and its individual obligations (creditworthiness) and are not statementsof fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.
R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties.
R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by theissuer. For details, please refer to http://www.r-i.co.jp/eng/about.html.

©Rating and Investment Information, Inc.

NEWS RELEASE
R&I RATINGS:ISSUER:
ISSUER RATING:
RATING OUTLOOK:

Nippon Accommodations Fund Inc. (Sec. Code: 3226)
AA- (Downgraded from (AA); Removed from the Rating Monitor)
StableISSUE:
Bonds to be Rated:
Issue Amount:
Issue Period:
R&I RATING:

Preliminary Rating for the Shelf Registration scheme
Corporate Bonds
Yen 100,000 million (Shelf Amount)
Two years from Jul 18, 2007
AA- (Downgraded from (AA); Removed from the Rating Monitor)

LONG-TERM ISSUE RATING:
Issue Date
Redemption
Issue Amount (mn)Unsec. Str. Bonds No. 1
Nov 15, 2007 Nov 14, 2014
Yen 10,000
R&I RATING:
AA- (Downgraded from (AA); Removed from the Rating Monitor)
In principle, an Issuer Rating is R&I's opinion on an issuer's overall capacity to repay its
financial obligations as agreed and is assigned to all issuers. The rating of individual obligations
includes the prospect of recovery and reflects the terms and conditions of the agreement and it may
be lower or higher than the Issuer Rating.

Rating and Investment Information, Inc. Nihonbashi 1-chome Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027, Japan
Investors Service Division TEL.03-3276-3511 FAX.03-3276-3413 http://www.r-i.co.jp
Credit ratings are statements of R&I’s opinions regarding an issuer’s general capacity to repay its financial obligations and its individual obligations (creditworthiness) and are not statementsof fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.
R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties.
R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by theissuer. For details, please refer to http://www.r-i.co.jp/eng/about.html.

©Rating and Investment Information, Inc.